Is Watching Atlasians Debate the Specifics of the Federal Financial Bailouts...

[Lunar]

lunar continues to ramble

To me it's worse.  At least we can get the GIST of some kind of military strategy.  I doubt any of us here have calculated the derivations and calculus that takes place in any of these financial deals.  It is of my opinion that if anyone here knew the correct solution, they could be making hundreds of thousands of dollars in New York right now because the entire upper class of that city has plunged into chaos because no one is sure. 

This is a simple post, I think we all need to chill and sit back a little bit before we jump the gun and accuse the government economic team, PhD's all, of making the wrong decisions.  The financial network, which various other institutions depend upon is INSANELY complex and sometimes fragile and sometimes not.  It's not the sort of thing that you can just read an Economist or WSJ article on and understand more than fractionally.  Sometimes costs of bailing out companies seem bigger than they appear (we'll make the money back).  None of the costs are actually burdening current US taxpayers, China's more than happy to buy all of it.

Look, I'm not saying the feds are right, I'm not saying that they're wrong.  I'm saying I think we, the uneducated and uninformed masses, don't have the tools to make legitimate and in-depth criticisms of the specifics of this sort of policy-making.

I think we can authentically criticize the overarching values (should we put business responsibility over societal utility, even if it would cause a depression), but when we start getting into the details, is it too early to cry foul?

Discuss (or not).

[Lunar]

This is potentially ABOUT job creation.  If you make sure you have easily accessible loans for small and medium businesses, then you have someone to hire the 4 million workers in the construction business that can no longer build new houses, soon to be unemployed.  If they no longer have a job, then other people will be unemployed as well.  It's my uninformed and undereducated opinion that Bernanke is in fact actually making the decisions he's making TO promote job creation!

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

[Lunar]

Well jfern, I agree with you on a lot of what you said.  But this is a crisis.  Education, research, and infrastructure are all long-term solutions.  We're dropping below our economic potential and we're trying to figure out how to get back up there.

Despite my economic score next to my profile, I strongly believe in government investment in universities (should be free), infrastructure (should be 1/2 the price of gas, tax gas if it isn't), and research (mega tax breaks).  You hit the nail on the head, this government is too concerned with that interest or that interest and not concerned enough with, again, taxing things with negative externalities (pollution, traffic) and not concerned enough with funding things with positive externalities, all of your aforementioned subjects.

But these things are CONGRESS's fault, and I think everyone should feel completely ok to criticize Congress.  They don't know anything more about economics than we do.  They just know who writes them fundraising checks for their reelection campaigns.

I agree with you completely that it is a larger failure.  Bush tax cuts, some of which were coincidencely perfectly timed to arrive after 9/11, favored the rich too much and Bush favored tax cuts on pollution.  All of this is dumb.  The macro picture could be improved, through more spending on things that make the business environment better (infrastructure/education).  I don't know this for sure, but that's my opinion.

But we're talking about whether specific large financial investment companies go under or go afloat, whether or not they will be able to pay back debts amounting to what, hundreds of billions (at least), to the sources that loaned them the money without realizing the risk.

Gawsh, I don't want to type up long complicated posts on this thread since I'm trying to argue that all of us are stupid! 

[Lunar]

Of course, of course. 

Say, politics.  I mean, when we say "Ooops, bad move Obama, that ad was awful" we know we are in a fog of war without access to internals or knowledge of his end goals.  We're making predictions about what will backfire or not which will be confirmed in the trackers in two days.  Also, collectively, we're actually qualified to be political consultants.

But when we say "Oops, bad move Bernanke, you shouldn't have bailed out AIG," everyone is acting as if they know every firm AIG is invested in and what the impact that move, or lack thereof, would have on the overall economy (hint, it probably doesn't only affect AIG and prob affects small businesses).

I'm just saying, before we call foul, let's wait a bit.  We can guess and that's fun, but let's not pretend like any of us are crunching the calculus on every firms' investments to figure out what the utility-maximizing decision is.  It's just like a war.  On the first day, it's sort of silly to start critiquing where Petraeus (or whoever) moves each brigade.  Afterwards we can.

[Lunar]

Despite my economic score next to my profile, I strongly believe in government investment in universities (should be free), ...

You may be interested to take a look at the model for university education we have over here...

It's not free, per se, but the Government gives you a loan which is indexed at inflation and paid back on top of your taxes (so if you don't earn enough, you don't pay it back until you do earn enough). It's also heavily subsidised, so the amount you pay back is far below the actual cost of the degree. It means that expense isn't a factor for people from low income backgrounds, while a graduate who goes on to become a hot-shot corporate lawyer still contributes to their education. I think it gets the balance pretty well right between a fully private system and a completely subsidised system. Don't know if it would work in the US, but it's an idea you might want to kick around a bit.

Free isn't what I meant, I was typing quickly before bed.  I was thinking more like subsidized to the extent of the positive external benefit (increasing the competitiveness of American workers, lowering debt of the incoming workforce, etc.)

but this is a tangent

[Lunar]

Oh, it's fine to criticize them.  But criticisms have to admit a certain fog of war - we simply don't know what numbers and high-end mathematical models these PhD economists are using to make their decisions.  Unlike a tactical war or political decision, I feel that a lot of what is going on in actually beyond us.  The complexity and math is not the sort of thing one can understand by reading a few WSJ articles.

People on the forum, and people I overhear in real life, when they criticize him, tend to do it more on larger, principled terms about what a government "should" do.  I mean, Bernanke/Paulson aren't making these decisions without internal debate and there is plenty of reason to suspect that they might be making the wrong decision.  But without knowing the exact interlinking of the financial system with other parts of the economy, the exact cost/risk of government payouts, and absolutely essential details like these, we can't come up with our own risk model to determine if the right decision is being made.  We're sort of shooting in the dark here moreso than most topics boggled about on this forum

[Lunar]

This isn't a black and white situation.  People need to realize that.  This involves complexity of astronomical proportions.

That applies to a lot of things. For instance, the Middle East. If they'll be simplistic about that, we can be simplistic about the economy.

It's not a tit-for-tat thing.

But I'll tell you what, *I* won't be simplistic about the Middle-East if you do me the same thing for me on the economy.